Warner Bros. board opposes Paramount's $108B hostile bid

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(The Center Square) - The Warner Bros. Discovery board Wednesday advised shareholders to reject Paramount Skydance’s acquisition offer, calling Netflix’s offer superior.

But it’s still up to stockholders to make the final decision. They have until Jan. 8 to vote to accept or reject Paramount Skydance’s offer, which is called a “hostile bid” because it doesn't require the Warner Bros. Discovery board's approval. It's pitched to shareholders.

“The WBD Board urges you to reject Paramount Skydance’s unsolicited, inferior and illusory tender offer,” the board wrote in a letter to stockholders.

"After a robust and highly competitive strategic review process, the WBD Board had already recommended the transaction with Netflix. Today they have reaffirmed that this transaction is the best and most certain path forward for WBD and its stockholders and therefore recommend you vote to approve the Netflix Merger when the WBD stockholder meeting is convened," the board wrote.

Netflix on Wednesday said it welcomed the Warner Bros. Discovery recommendation, while Paramount Skydance reaffirmed its all-cash offer of $30 a share to buy the entire Warner Bros. Discovery company.

 Netflix is offering $27.75 per share in a mix of cash and stocks for Warner Bros. and its assets such as HBO, HBO Max, DC Comics and DC Studios. Under Netflix's offer, Warner Bros. Discovery’s cable networks, such as CNN, TNT, HGTV and Food Network, would be spun off into a separate, publicly traded company.

Paramount Skydance's offer has an equity value of $77.9 billion and a total enterprise value of $108.4 billion. The Netflix deal has an equity value of $72 billion and an enterprise value of $82.7 billion.

Despite those numbers, the Warner Bros. Discovery Board and Netflix say the Netflix deal is better. In it letter to stockholders, the  board noted shareholders will get the additional value of shares from Discovery Global, the newly separated company with the cable networks.

“The Warner Bros. Discovery Board reinforced that Netflix’s merger agreement is superior and that our acquisition is in the best interest of stockholders,” said Netflix Co-CEO Ted Sarandos in a statement Wednesday.

He noted Netflix, the world's largest streaming service, remains committed to releasing Warner Bros. movies in theaters.

But David Ellison, chairman and CEO of Paramount Skydance, said he feels encouraged by the feedback his company has received from Warner Bros. Discovery shareholders “who clearly understand the benefits of our offer.

“We will continue to move forward to deliver this transaction, which is in the best interest of WBD shareholders, consumers and the creative industries,” Ellison said in a statement.

Paramount Skydance said its deal includes an equity commitment from the Ellison family trust, which contains more than $250 billion in assets. It also noted Warner Bros. Discovery shareholders could tend their shares now in favor of Paramount Skydance rather than having to wait for months to approve the Netflix offer at a special shareholder meeting.

But economist Wayne Winegarden previously told The Center Square that the Netflix offer could ultimately be better for Warner Bros. Discovery stockholders because they could make money from the company spinning off its cable networks.

The Netflix deal also could be better for Warner Bros. employees because the risk of layoffs would be less, said Winegarden, a senior business fellow at the Pasadena-based Pacific Research Institute. He noted there are more redundancies between Warner Bros. and Paramount Skydance than between Warner Bros. and Netflix.

Warner Bros. and Netflix differ from each other more than Burbank-based Warner Bros. and Hollywood-based Paramount, two of history's longest operating movie studios.

Sarandos of Netflix sees his company and Warner Bros. as ideal partners.

“Netflix and Warner Bros. complement each other, and we’re excited to combine our strengths with their theatrical film division, world-class television studio, and the iconic HBO brand, which will continue to focus on prestige television,” Sarandos said.

Netflix Co-CEO Greg Peters said a Netflix acquisition of Warner Bros. would be “pro-consumer, pro-innovation, pro-creator and pro-growth.

“Together we will deliver an even broader selection of great series and films that audiences can watch at home and in theaters, while driving long-term value for our stockholders,” Peters said.